Schafer: Sherco's fate is tricky to call, but let's decide soon

February 9, 2014 — 5:55am

JOEY McLEISTER &#x2022; Star Tribune fileThe Sherco power plant in Becker, Minn., provides steady power day in and day out from units that are as much as 40 years old. But concerns about greenhouse gases mean change is coming.

On a cold morning’s drive from Minneapolis to the Sherco Generating Station in Becker, Minn., it soon became obvious that the detailed map and directions Xcel Energy had e-mailed could have been left at home.

Just follow the massive plume from Sherco’s tall stacks, clearly visible more than 30 miles up the freeway.

Sherco is the state’s largest single generator of greenhouse gases, and it’s easy to complain about a big coal-fired plant like Sherco as last century’s dirty technology. On the other hand, it’s 20th-century technology we still use every day. Sherco is why many of us had lights that turned on today.

The two older units at Sherco generate about 20 percent of the power used by Xcel’s Minnesota customers. They generate power cheaply — forgetting, for a moment, the uncaptured cost of carbon and other emissions — and reliably. Replacing them with something equally cheap and reliable will be a very big challenge.

Xcel has been talking with regulators about options for the older units, which are approaching their 40th birthday, and it owes the Minnesota Public Utilities Commission another update this summer.

This could mean that the units are replaced with natural-gas-fired plants, more renewable sources and gas combined, or it could mean upgraded emissions systems that will significantly extend their lives.

Environmentalists say enough is known right now to make it clear that we don’t want coal-fired plants, so decide already. Xcel is sticking to its view that a deliberative process is best when figuring out a decision that could affect so many family budgets.

Here’s a suggestion in the spirit of compromise: Reach a decision based on the best data, but pick up the pace. Once business owners and consumers know what the post-coal energy market looks like, they can start making plans.

That’s not to suggest that there is no appreciation here for what’s at stake. When Xcel Energy’s Jim Alders said “the state hasn’t looked into anything of this magnitude since those units were approved in the 1960s and ’70s,” the main reason is simply the scale of the Sherco operation.

The 4,500-acre Sherco facility has about 2,400 megawatts out of Xcel’s 8,300 megawatts of total regional generating capacity. Sherco 1 and 2 are the 1970s-era twins now talked about as candidates for retirement. The bigger Sherco 3 unit on the same site, majority-owned by Xcel, was built in the 1980s.

Altogether, they burn more than 9 million tons of western coal a year.

The company continues to upgrade the emissions control system of 1 and 2, and executives believe they could have years of life left in them, depending on upcoming air-quality rules. Although they use different technologies to clean the stack gasses than unit 3 does, Alders said the environmental performance of the older two units isn’t that much different.

These plants can ride the daily power demand cycle up and down by changing the amount of pulverized coal injected into the boilers, as well as adjusting to the constantly changing amount of wind power coming into Xcel’s system.

But a big reason the decision over their future is so important is that these plants are baseload generators.

Baseload is the minimum amount of power Xcel has to make available. It takes about 12 hours from a cold start to get a Sherco unit on the electrical grid, but once fired up it can run day and night through all kinds of weather and at peak efficiency. That makes them perfect for baseload generation.

Standing in the Sherco 1 and 2 control room on a recent morning, the displays on either wall showed that one of the units was consistently generating 728 megawatts of power and its twin was generating 729, each enough to power more than 600,000 homes.

How difficult will it be to replace that all-day, everyday capacity with energy sources such as solar generation?

Well, the forward-thinking church in St. Paul where I belong is planning to install a solar array on its roof. At the rated capacity for this solar array, the state only needs 40,381 more churches to install similar ones to replace Sherco 1 and 2.

Of course, the Sherco units would still be needed after the sun went down.

Xcel Energy gives the impression that it’s not that committed to any one option, just a process for getting the decision right. Alders said Xcel would like to see final air quality regulations before any decisions are made. But if need be, and with enough time, it can retire Sherco 1 and 2 and get other generation units planned, financed, constructed and on the grid.

The study now underway at Xcel, Alders said, may not look that much different from a Sherco life-cycle study filed last summer.

The options Xcel presented then included natural gas generation, so-called combined cycle plants like the newer High Bridge Generating Station in St. Paul. That would cost about $1.4 billion in capital spending.

It would be great to have that kind of plant in Becker, with its experienced local workforce and nearby transmission infrastructure. But that would mean building an 88-mile gas line at perhaps an additional $200 million.

Other options combined more natural gas plants with additional renewable energy generation, but wind power provides a different set of challenges. None is more fundamental than system reliability, which means keeping enough power generation going on days when the wind doesn’t blow, and Xcel customers still want to see their air conditioners turn on.

The biggest impression left by reading Xcel’s 2013 summary of options is that no matter what gets decided, electricity prices are going up.

And if that’s the case, he quite sensibly added, “the more time we have to plan for it, the better.”

Lee Schafer came to the Star Tribune after 15 years as a corporate officer, consultant and investment banker in the Twin Cities. He has been a columnist for Twin Cities Business magazine and was senior editor for Corporate Report Minnesota. Follow @LeeASchafer